As the traffic manager for ABC Electronics, you have been charged with the task of reducing shipping costs for a fast selling cable product that is sold by the pound. You have a very satisfactory relationship with a third-party carrier who is currently giving you with a very competitive price. All orders are shipped to customers at a cost of US$0.05 a pound with a fixed US$50 fee per shipment. Over the past 2 weeks, daily demand for the cable has been tracked and appears in the table below.

Currently, ABC ships orders every day with a one day preparation time, which means that ABC has to process the customer order, pick and pack, and ship it within a two lead time. One of management’s suggestions is to change the quoted shipment time by aggregating shipments by adding 1 or 2 more days. Sales and marketing have done research on extending the shipping time and have found that a small increase the lead time will have relatively little impact on sales.

1. What would be the impact on the transportation cost with a 3 day or a 4 day lead time?

2. Which would be the best choice?
 

Week 1 Week 2 Monday 15,025 16,025 Tuesday 13,740 10,005 Wednesday 855 14,525 Thursday 13,250 995 Friday 950 17,500 Saturday 15,750 15,250